DP14310 K-Returns to Education
|Author(s):||Andreas Fagereng, Luigi Guiso, Martin Holm, Luigi Pistaferri|
|Publication Date:||January 2020|
|Keyword(s):||Returns to capital, Returns to education|
|JEL(s):||G0, I0, J3|
|Programme Areas:||Labour Economics, Financial Economics|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=14310|
We exploit a school reform that increased the length of compulsory schooling in Norway in the 1960s to study the causal effect of formal general education on returns on wealth (k-returns). OLS estimates reveal a strong, positive and statistically significant correlation between education and returns on individual net worth. This effect disappears in IV regressions, implying that general education has no causal effect on individual performance in capital markets, whose heterogeneity largely reflects non-acquired ability. On the contrary, we find that education causes higher returns in the labor market (l-returns). We speculate about possible rationales for this important asymmetry.